Liberty Oilfield Services Inc. Announces Second Quarter 2019 Financial and Operational Results

DENVER--()--Liberty Oilfield Services Inc. (NYSE: LBRT; “Liberty” or the “Company”) announced today second quarter 2019 financial and operational results.

Summary Results and Highlights

  • Revenue of $542 million and net income1 of $41 million, or $0.32 fully diluted earnings per share, for the quarter ended June 30, 2019
  • Adjusted EBITDA2 of $92 million and annualized Adjusted EBITDA per average active fleet of $16.1 million for the quarter ended June 30, 2019
  • Revenue of $1.1 billion and net income1 of $74 million, or $0.58 fully diluted earnings per share, for the six months ended June 30, 2019
  • Adjusted EBITDA2 of $177 million and annualized Adjusted EBITDA per average active fleet of $15.8 million for the six months ended June 30, 2019

“We’re proud to have delivered $0.32 fully diluted earnings per share in the second quarter, a 23% increase compared to the first quarter of 2019 of $0.26. Revenue in the quarter increased 1% to $542 million and Adjusted EBITDA2 increased 9% to $92 million, each as compared to the first quarter of 2019. We were able to deliver this financial performance due to the continued executional excellence of our operations and supply chain teams, plus close coordination with our customers on scheduling. These strong financial results enabled us to continue improving our service quality and organically growing while maintaining our commitment of returning capital to stockholders.

With our focus on long-term success, we continue our commitment to achieve superior returns on invested capital, maintain a strong balance sheet and invest for the future. For the twelve months ended June 30, 2019 we achieved Pre-Tax Return on Capital Employed (“ROCE”)3 of 23%, generated significant free cash flow and returned over $130 million to stockholders. As always, the Liberty team continues to focus on driving technology innovations and high efficiency operations which are a win for Liberty and a win for our customers,” commented Chris Wright, Chief Executive Officer.

Outlook

Our first half 2019 results reflect the strong demand for Liberty’s differential frac services. Based on visibility into our customer activity pipeline for the year, we believe demand for Liberty fleets will remain high through the third quarter and we are working closely with our customers to mitigate the effect of operator budget exhaustion towards the end of the year. As in the start of 2019, we expect demand for Liberty’s services to be strong at the start of 2020 when operator budgets are renewed.

Operators are managing activity to not exceed their announced budgets and therefore the frac market will most likely experience utilization challenges in the fourth quarter of 2019. There continues to be an oversupply of frac fleets in the market which is holding down pricing. We would not expect pricing to improve until supply of actively staffed frac equipment balances with demand.

We are focused on generating strong returns on capital and free cash flow in 2019, while we continue to invest in technology and growing our competitive advantages. Since inception, Liberty has invested in equipment that leads the industry in technology and efficiency. Liberty is a first mover in driving an Environmental, Social and Governance (“ESG”) conscious approach to hydraulic fracturing. We have partnered with our customers to advance ESG solutions since 2013, as demonstrated by our market leading low-emission Quiet Fleets®. Every Liberty new build fleet since 2013 has been either able to run on natural gas or is the latest generation Tier 4 engine, with dramatically reduced emissions.

     

1.

Net income attributable to controlling and noncontrolling interests.

     

2.

“Adjusted EBITDA” is not presented in accordance with generally accepted accounting principles in the United States (“U.S. GAAP”). Please see the supplemental financial information in the table under “Reconciliation of Net Income to EBITDA and Adjusted EBITDA” at the end of this earnings release for a reconciliation of the non-GAAP financial measure of Adjusted EBITDA to its most directly comparable GAAP financial measure.

     

3.

Pre-Tax Return on Capital Employed (“ROCE”) is an operational measure. Please see the supplemental financial information in the table under “Calculation of Pre-Tax Return on Capital Employed” at the end of this earnings release for a calculation of this measure.

Second Quarter Results

For the second quarter of 2019, revenue increased 1% to $542 million from $535 million in the first quarter of 2019.

Net income before income taxes totaled $48 million for the second quarter of 2019 compared to $40 million for the first quarter of 2019.

Net income1 (after taxes) totaled $41 million for the second quarter of 2019 compared to net income1 of $34 million in the first quarter of 2019.

Adjusted EBITDA2 increased 9% to $92 million from $85 million in the first quarter. Annualized Adjusted EBITDA per average active fleet increased to $16.1 million in the second quarter compared to $15.4 million in the first quarter. Please refer to the reconciliation of Adjusted EBITDA (a non-GAAP measure) to net income (a GAAP measure) in this earnings release.

Fully diluted earnings per share was $0.32 for the second quarter of 2019 compared to $0.26 for the first quarter of 2019.

Balance Sheet and Liquidity

As of June 30, 2019, Liberty had cash on hand of $33 million and total debt of $107 million, net of deferred financing costs and original issue discount. There were no borrowings drawn on the ABL credit facility, and total liquidity, including availability under the credit facility, was $266 million.

Stockholder Returns

“Liberty’s financial results, favorable long-term outlook and strong balance sheet, support our balanced strategy of disciplined growth and returning capital to our stockholders. Liberty is committed to compounding stockholder value by reinvesting cash flow at high rates of return and returning cash to stockholders as appropriate. We are excited by the growth opportunities in front of us and the positive long-term outlook for the shale revolution and the benefits that this brings to our industry and the country as a whole,” concluded Mr. Wright.

During the quarter ended June 30, 2019 the Company paid a quarterly cash dividend of $0.05 per share of Class A common stock, or approximately $3.4 million in aggregate to stockholders. Liberty Oilfield Services New HoldCo LLC (Liberty LLC) also paid quarterly distributions of $0.05 per unit, for total dividends and distributions of approximately $5.6 million.

Liberty announced on July 23, 2019 a cash dividend of $0.05 per share of Class A common stock, to be paid on September 20, 2019 to holders of record as of September 6, 2019. A distribution of $0.05 per unit has also been approved for holders of units in Liberty LLC, which will use the same record and payment date.

Future declarations of quarterly cash dividends are subject to approval by the Board of Directors and to the Board’s continuing determination that the declarations of dividends are in the best interests of Liberty and its stockholders. Future dividends may be adjusted at the Board’s discretion based on market conditions and capital availability.

Conference Call

Liberty will host a conference call to discuss the results at 8:00 a.m. Mountain Time (10:00 a.m. Eastern Time) on Wednesday, July 31, 2019. Presenting Liberty’s results will be Chris Wright, Chief Executive Officer, Ron Gusek, President, and Michael Stock, Chief Financial Officer.

Individuals wishing to participate in the conference call should dial (833) 255-2827, or for international callers (412) 902-6704. Participants should ask to join Liberty's call. A live webcast will be available at http://investors.libertyfrac.com. The webcast can be accessed for 90 days following the call. A telephone replay will be available shortly after the call and can be accessed by dialing (877) 344-7529, or for international callers (412) 317-0088. The passcode for the replay is 10133473. The replay will be available until August 7, 2019.

About Liberty

Liberty is an independent provider of hydraulic fracturing services to onshore oil and natural gas exploration and production companies in North America. Liberty was founded in 2011 with a relentless focus on improving tight-oil completions, and an emphasis on customer partnerships and technology to find innovative answers to frac optimization. Liberty is headquartered in Denver, Colorado. For more information about Liberty, please contact Investor Relations at IR@libertyfrac.com.

Non-GAAP Financial Measures

This earnings release includes unaudited non-GAAP financial and operational measures, including EBITDA, Adjusted EBITDA and Pre-Tax Return on Capital Employed. We believe that the presentation of these non-GAAP financial and operational measures provides useful information about our financial performance and results of operations. Non-GAAP financial and operational measures do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial and operational measures is not intended to be a substitute for, and should not be considered in isolation from, the financial measures reported in accordance with U.S. GAAP. See the tables entitled Reconciliation and Calculation of Non-GAAP Financial and Operational Measures for a reconciliation or calculation of the non-GAAP financial or operational measures to the most directly comparable GAAP measure.

Forward-Looking and Cautionary Statements

The information above includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included herein concerning, among other things, the deployment of fleets in the future, planned capital expenditures, future cash flows and borrowings, pursuit of potential acquisition opportunities, our financial position, return of capital to stockholders, business strategy and objectives for future operations, are forward-looking statements. These forward-looking statements are identified by their use of terms and phrases such as “may,” “expect,” “estimate,” “project,” “plan,” “believe,” “intend,” “achievable,” “anticipate,” “will,” “continue,” “potential,” “should,” “could,” and similar terms and phrases. Although we believe that the expectations reflected in these forward-looking statements are reasonable, they do involve certain assumptions, risks and uncertainties. These forward-looking statements represent our expectations or beliefs concerning future events, and it is possible that the results described in this earnings release will not be achieved. These forward-looking statements are subject to certain risks, uncertainties and assumptions identified above or as disclosed from time to time in Liberty's filings with the Securities and Exchange Commission. As a result of these factors, actual results may differ materially from those indicated or implied by such forward-looking statements.

Any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we do not undertake any obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. New factors emerge from time to time, and it is not possible for us to predict all such factors. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in “Item 1A. Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the SEC on February 28, 2019 and in our other public filings with the SEC. These and other factors could cause our actual results to differ materially from those contained in any forward-looking statements.

Liberty Oilfield Services Inc.

Selected Financial Data

(unaudited)

 

 

Three Months Ended

 

Six Months Ended

 

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

 

2019

 

2019

 

2018

 

2019

 

2018

Statement of Income Data:

 

(amounts in thousands, except for per share and fleet data)

Revenue

 

$

542,147

 

 

$

535,148

 

 

$

628,084

 

 

$

1,077,295

 

 

$

1,123,244

 

Costs of services, excluding depreciation and amortization shown separately

 

426,444

 

 

429,299

 

 

455,469

 

 

855,743

 

 

832,296

 

General and administrative

 

23,989

 

 

22,088

 

 

27,313

 

 

46,077

 

 

48,990

 

Depreciation and amortization

 

40,368

 

 

38,387

 

 

30,606

 

 

78,755

 

 

58,622

 

Loss on disposal of assets

 

143

 

 

1,223

 

 

485

 

 

1,366

 

 

565

 

Total operating expenses

 

490,944

 

 

490,997

 

 

513,873

 

 

981,941

 

 

940,473

 

Operating income

 

51,203

 

 

44,151

 

 

114,211

 

 

95,354

 

 

182,771

 

Interest expense

 

3,597

 

 

4,182

 

 

3,540

 

 

7,779

 

 

10,034

 

Net income before taxes

 

47,606

 

 

39,969

 

 

110,671

 

 

87,575

 

 

172,737

 

Income tax expense

 

7,083

 

 

6,060

 

 

15,930

 

 

13,143

 

 

24,009

 

Net income

 

40,523

 

 

33,909

 

 

94,741

 

 

74,432

 

 

148,728

 

Less: Net income attributable to predecessor, prior to Corporate Reorganization

 

 

 

 

 

 

 

 

 

8,705

 

Less: Net income attributable to noncontrolling interests

 

18,491

 

 

15,788

 

 

45,146

 

 

34,279

 

 

66,753

 

Net income attributable to Liberty Oilfield Services Inc. stockholders

 

$

22,032

 

 

$

18,121

 

 

$

49,595

 

 

$

40,153

 

 

$

73,270

 

Net income attributable to Liberty Oilfield Services Inc. stockholders per common share (1):

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.32

 

 

$

0.27

 

 

$

0.72

 

 

$

0.59

 

 

$

1.06

 

Diluted

 

$

0.32

 

 

$

0.26

 

 

$

0.71

 

 

$

0.58

 

 

$

1.05

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

68,404

 

 

67,427

 

 

69,020

 

 

67,918

 

 

68,977

 

Diluted

 

114,338

 

 

114,171

 

 

118,638

 

 

114,277

 

 

118,407

 

Other Financial and Operational Data

 

 

 

 

 

 

 

 

Capital expenditures (2)

 

$

43,950

 

 

$

51,108

 

 

$

45,576

 

 

$

95,058

 

 

$

128,443

 

Adjusted EBITDA (3)

 

$

92,120

 

 

$

84,815

 

 

$

148,600

 

 

$

176,935

 

 

$

248,767

 

Total Fleets at beginning of period (4)

 

23.0

 

 

22.0

 

 

21.0

 

 

22.0

 

 

19.0

 

Total Fleets at end of period (4)

 

23.0

 

 

23.0

 

 

22.0

 

 

23.0

 

 

22.0

 

Average Active Fleets (5)

 

23.0

 

 

22.3

 

 

21.3

 

 

22.6

 

 

20.4

 

Annualized Adjusted EBITDA per Average Active Fleet (6)

 

$

16,065

 

 

$

15,425

 

 

$

27,983

 

 

$

15,788

 

 

$

24,591

 

(1) Net income attributable to Liberty Oilfield Services Inc. stockholders per common share for the six months ended June 30, 2018 does not include net income attributable to our predecessor, prior to corporate reorganization.
(2) Capital expenditures presented above are shown on an as incurred basis, including capital expenditures in accounts payable and accrued liabilities.
(3) Adjusted EBITDA is a non-GAAP financial measure. See the tables entitled “Reconciliation and Calculation of Non-GAAP Financial and Operational Measures” below.
(4) Total Fleets represents the number of deployed and active fleets as of the designated date.
(5) Average Active Fleets is calculated as the daily average of the number of active fleets for the period presented.
(6) Annualized Adjusted EBITDA per Average Active Fleet is calculated as Adjusted EBITDA for the respective quarter or six month period annualized, divided by the Average Active Fleets, as defined above.

 

Liberty Oilfield Services Inc.

Condensed Consolidated and Combined Balance Sheets

(unaudited, amounts in thousands)

 

June 30,

 

December 31,

 

2019

 

2018

Assets

 

Current assets:

 

 

 

Cash and cash equivalents

$

32,503

 

 

$

103,312

 

Accounts receivable and unbilled revenue

346,381

 

 

247,961

 

Inventories

86,809

 

 

60,024

 

Prepaids and other current assets

20,332

 

 

49,924

 

Total current assets

486,025

 

 

461,221

 

Property and equipment, net

647,614

 

 

627,053

 

Operating and finance lease right-of-use assets

120,565

 

 

 

Other assets

49,171

 

 

28,227

 

Total assets

$

1,303,375

 

 

$

1,116,501

 

Liabilities and Equity

 

 

 

Current liabilities:

 

 

 

Accounts payable

$

108,102

 

 

$

80,490

 

Accrued liabilities

127,496

 

 

138,861

 

Current portion of operating and finance lease liabilities

34,701

 

 

 

Current portion of long-term debt, net of discount

397

 

 

385

 

Total current liabilities

270,696

 

 

219,736

 

Long-term debt, net of discount

106,375

 

 

106,139

 

Long-term operating and finance lease liabilities

79,869

 

 

 

Deferred tax liability

33,915

 

 

32,994

 

Payable pursuant to tax receivable agreement

20,074

 

 

16,818

 

Total liabilities

510,929

 

 

375,687

 

 

 

 

 

Stockholders' equity:

 

 

 

Common Stock

1,126

 

 

1,136

 

Additional paid in capital

318,099

 

 

312,659

 

Retained earnings

152,322

 

 

119,274

 

Total stockholders’ equity

471,547

 

 

433,069

 

Noncontrolling interest

320,899

 

 

307,745

 

Total Equity

792,446

 

 

740,814

 

Total liabilities and equity

$

1,303,375

 

 

$

1,116,501

 

Liberty Oilfield Services Inc.

Reconciliation and Calculation of Non-GAAP Financial and Operational Measures

(unaudited, amounts in thousands)

Reconciliation of Net Income to EBITDA and Adjusted EBITDA

 

 

Three Months Ended

 

Six Months Ended

 

June 30,

 

March 31,

 

June 30,

 

June 30,

 

2019

 

2019

 

2018

 

2019

 

2018

Net income

$

40,523

 

 

$

33,909

 

 

$

94,741

 

 

$

74,432

 

 

$

148,728

 

Depreciation and amortization

40,368

 

 

38,387

 

 

30,606

 

 

78,755

 

 

58,622

 

Interest expense

3,597

 

 

4,182

 

 

3,540

 

 

7,779

 

 

10,034

 

Income tax expense

7,083

 

 

6,060

 

 

15,930

 

 

13,143

 

 

24,009

 

EBITDA

$

91,571

 

 

$

82,538

 

 

$

144,817

 

 

$

174,109

 

 

$

241,393

 

Fleet start-up costs

406

 

 

1,054

 

 

3,298

 

 

1,460

 

 

6,607

 

Loss on disposal of assets

143

 

 

1,223

 

 

485

 

 

1,366

 

 

565

 

Advisory services fees

 

 

 

 

 

 

 

 

202

 

Adjusted EBITDA

$

92,120

 

 

$

84,815

 

 

$

148,600

 

 

$

176,935

 

 

$

248,767

 

Calculation of Pre-Tax Return on Capital Employed

 

Twelve Months Ended

 

June 30, 2019

 

2019

 

2018

Net income

$

174,737

 

 

 

Add back: Income tax expense

29,519

 

 

 

Pre-tax net income

$

204,256

 

 

 

Capital Employed

 

 

 

Total debt, net of discount

$

106,772

 

 

$

107,205

 

Total equity

792,446

 

 

739,496

 

Total Capital Employed

$

899,218

 

 

$

846,701

 

 

 

 

 

Average Capital Employed (1)

$

872,960

 

 

 

Pre-Tax Return on Capital Employed (2)

23

%

 

 

(1) Average Capital Employed is the simple average of Total Capital Employed as of June 30, 2019 and 2018.
(2) Pre-tax Return on Capital Employed is the ratio of pre-tax net income for the twelve months ended June 30, 2019 to Average Capital Employed

Contacts

Michael Stock
Chief Financial Officer
303-515-2851
IR@libertyfrac.com

Contacts

Michael Stock
Chief Financial Officer
303-515-2851
IR@libertyfrac.com